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Question:

If the analyst estimates that the selling price of the company’s stock after one year will be $43, the value of the company’s common stock today is closest to:

A $41.
Explaination

Use the one‐period DDM.
Cost of equity = 0.05 + 1.1 (0.08) = 13.8%
Stock’s value = (3.75 / 1.138) + (43 / 1.138) = $41.08